The Bank of Japan's (BoJ) interest rate hike is often XEM by the market as a negative signal for Bitcoin and other risky assets, not because of any inherent problems with BTC , but because of the ripple effect on global capital flows and liquidation .
For decades, Japan maintained extremely low interest rates, becoming a source of cheap Capital for the world through carry trade – investors borrowing yen at low cost and then transferring it to higher-yielding assets such as stocks, real estate, and even cryptocurrencies.
When the Bank of Japan (BoJ) raises interest rates, borrowing costs increase and the risk of exchange rate reversal increases, forcing these Capital flows to shrink or withdraw, leading to selling pressure on risky markets, including Bitcoin. Higher interest rates also cause short-term capital flows to become defensive, prioritizing bonds and safe assets, while BTC is a non-cash-generating asset and heavily dependent on liquidation.
Furthermore, the potential for a stronger yen following the interest rate hike could put pressure on the USD and USD-denominated assets, increasing profit-taking activity. However, this impact is primarily short-term due to the liquidation shock; in the long term, Bitcoin's value remains tied to the larger picture of the global monetary system, where public debt is rising and fiat currencies continue to erode.
Therefore, periods of bad news, such as when the Bank of Japan raises interest rates, are not typically for FOMO (fear of missing out), but rather crucial times for long-term investors to observe, prepare their positions, and manage Capital for the next cycle.
